Venezuela gets a grip on its oil

Thirty-two privately operated Venezuelan oilfields have returned to state control, the government has announced.

03 Jan 2006 01:33 GMT

Hugo Chavez wants Venezuela to earn more from its oil

At midnight on 31 December, a deadline expired for all private companies with contracts to pump oil independently to agree joint ventures that will give Venezuela's state oil company majority control.

The 32 operating agreements were signed between 1990 and 1997 when Venezuela's petroleum industry was open to private and foreign capital.

The objective at the time, when the price of crude was less than $10 a barrel, was to increase production at low-priority oilfields that had been closed because of their location or a lack of resources, and which Petroleos de Venezuela SA (PDVSA), had no plans to reactivate.

As oil prices have crept back up, the government of Hugo Chavez, the Venezuelan president, has sought to strengthen its control over the industry and increase its income from it. In 2001, it passed a hydrocarbons law that made the operating agreements illegal by requiring oil production to be carried out by companies majority-owned by the government.

Rafael Ramirez, the oil minister, said in a statement that, as of Sunday, Venezuela had successfully completed the "recovery" of the 32 fields.

Proven reserves

Chevron, BP PLC, Royal Dutch Shell and Petrobras SA, Brazil's state oil company, were among those that had signed deals earlier.

Repsol YPF, the Spanish-Argentine company, was the last to sign this week after buying out Exxon's stake in the Quiamare-La Ceiba oilfield. Exxon Mobil, which is based in Texas, had resisted the contract changes, which will significantly reduce the oil companies' share of profits.

Venezuela is the world's fifth-largest oil exporter and has the largest proven reserves outside of the Middle East.